Here is an excellent article discussing land taxes and land price bubbles in an Australian context. More from the same author here, and a plug for his personal blog here (take note of the CPI discussion - I want to discuss that in more detail in the future).
For those who want to digest some of the classic writings on the issue, see Progress and Poverty by Henry George (written in 1879).
Unfortunately there is a powerful political lobby working against such beneficial tax reform. The Property Council of Australia has been pushing for reductions in land taxes, citing any increase in tax revenue from this source as a national embarrassment. Of course, the large increase observed in Queensland (below) is partly due to the extremely low land tax base in 2007/08. Not mention of the scale of the tax, just the increase. Queensland's land tax revenue was just a third of the land tax revenue of NSW in 2007/08.
There are a number of reasons for this. In Holland, interest on loans for owner occupied dwellings is tax deductible. The interest rate itself is just 4%.
So if the Dutch average household income is slightly higher than Australia's, and the Dutch have generally less land available, why is owning a home so affordable there? And why is the rate of Dutch home ownership (54%) much lower than Australia's (70%)?